IRS: Special Rules Help Many with Disabilities Qualify for Earned Income Tax Credit

WASHINGTON – The Internal Revenue Service wants taxpayers with disabilities and parents of children with disabilities to be aware of the Earned Income Tax Credit (EITC) and correctly claim it if they qualify.

The IRS says that many with disabilities miss out on this valuable credit because they do not file a tax return. EITC could put a refund of up to $6,318 into an eligible taxpayer’s pocket. Many people who do not claim the credit fall below the income threshold requiring them to file. Even so, the IRS urges them to consider filing anyway because the only way to receive this credit is to file a tax return and claim the EITC.

The EITC is a federal income tax credit for workers who earn $53,930 or less for 2017 and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

To qualify for EITC, the taxpayer must have earned income. Usually, this means income either from a job or from self-employment. But taxpayers who retired on disability can also count as earned income any taxable benefits they receive under an employer’s disability retirement plan. These benefits remain earned income until the disability retiree reaches minimum retirement age. The IRS emphasized that Social Security benefits and Social Security Disability Income (SSDI) do not count as earned income.

Additionally, taxpayers may claim a child with a disability or a relative with a disability of any age to get the credit if the person meets all other EITC requirements. Use the EITC Assistant, on IRS.gov, available in English and Spanish, to determine eligibility and to estimate the amount of the credit.

People with disabilities are often concerned that a tax refund will impact their eligibility for one or more public benefits, including Social Security disability, Medicaid, and SNAP — the Supplemental Nutrition Assistance Program. The law is clear that tax refunds, including refunds from tax credits such as the EITC, are not counted as income for purposes of determining eligibility for such benefits. This applies to any federal program and any state or local program financed with federal funds.

Many EITC filers will receive their refunds later this year than in past years. That’s because by federal law, the IRS cannot issue refunds for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC) before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if they chose direct deposit and there are no other issues with the tax return. Even so, taxpayers claiming the EITC or ACTC should file as soon as they have all the documents they need to prepare a complete and accurate return.

The IRS and partners nationwide will hold the annual EITC Awareness Day on Friday, Jan. 26, 2018, to alert millions of workers who may be missing out on this significant tax credit and other refundable credits. One easy way to support this outreach effort is by participating on the IRS Thunderclap to help promote EITC Awareness Day through social media. For more information on EITC and other refundable credits, visit the EITC page on IRS.gov.